finance minister warns default would lead to ‘chaos’

2023-05-07 15:29:00

A default by the United States on their debt would lead to the “financial and economic chaos”Treasury Secretary Janet Yellen warned on Sunday, as the Republican opposition still refuses to raise the debt ceiling unconditionally.

The government of Joe Biden has warned that failing an agreement on an increase in the debt ceiling, the United States might no longer be able to meet their commitments from the beginning of June, which would put them in a situation of default, a first in the country’s history. For the American Minister of Finance, it would be an economic and financial disaster »she said on the American channel ABC.

A ceiling is legally set on the public debt of the United States and can only be raised by a majority vote in Congress. This requirement, specific to the United States, was long considered a parliamentary formality, but began to turn into a political confrontation when Barack Obama was president.

Political confrontation

At the end of April, the House of Representatives, in which the Republicans are in the majority, adopted a bill providing for strict supervision of public spending in exchange for raising the ceiling.

But the text has no chance of being adopted, as it stands, in the Senate, with a Democratic majority and US President Joe Biden has so far refused to negotiate possible concessions under pressure to ward off the specter of a default. He nevertheless invited the four leaders of the two major parties in Congress to the White House on Tuesday to discuss the matter.

“I know that he (Joe Biden) wants to put in place a process that allows us to discuss priorities and the level of spending, but these negotiations should not be conducted with a gun to the head of the American people,” Janet said. Yelen. « We shouldn’t get to the point of questioning whether or not the president can issue debt,” said the renowned Democrat and economist. “It would be a constitutional crisis. »

Eight million jobs at stake, according to a disaster scenario

The Head of State’s economic advisers believe that if the world’s leading power ceased to honor its financial deadlines for the long term, it might lose more than 8 million jobs this summer and see its gross domestic product plunge by 6%. .

The stock markets would unscrew, them, of 45% in the third quarter, predict these advisers, gathered within the “Council of economic advisors” of the White House. They assure that even in the event of a brief default, the American economy would suffer a rise in unemployment and a recession, of lesser magnitude.

The federal government actually reached this famous ceiling, of 31,000 billion dollars, in mid-January, but has so far managed this situation by accounting maneuvers.

(With AFP)